Slover-Becker v. Pitre Chrysler Plymouth Jeep, CIV04-1736PHX-JWS.
| Decision Date | 09 November 2005 |
| Docket Number | No. CIV04-1736PHX-JWS.,CIV04-1736PHX-JWS. |
| Citation | 409 F.Supp.2d 1158 |
| Parties | Christina SLOVER-BECKER, Plaintiff, v. PITRE CHRYSLER PLYMOUTH JEEP OF SCOTTSDALE, INC., Defendant. |
| Court | U.S. District Court — District of Arizona |
Marshall Scott Meyers, Krohn & Moss Ltd., Phoenix, AZ, for Plaintiff.
Tina Marie Ezzell, Sacks Tierney PA, Scottsdale, AZ, for Defendant.
[Re: Motions at Docket 32 and 36]
At docket 32 defendant Pitre Chrysler Plymouth Jeep of Scottsdale, Inc. ("Pitre") has moved for summary judgment. At docket 36 plaintiff Christina Slover-Becker ("Becker") has opposed Pitre's motion and cross-moved for summary judgment. The matter has been fully briefed. Neither party has requested oral argument, and it would not assist the court.
This action arises out of Becker's purchase of a 2000 Mercedes-Benz ML320 from Pitre under a Retail Installment Sales Contract ("RISC") in October 2003. The essential facts underlying the transaction are undisputed. In exchange for the Mercedes, Becker traded in a 2001 Jeep Grand Cherokee on which she still owed $27,300, paid $4,400 in cash, and financed the balance of $26,197.41. Pitre paid off the balance due on the Jeep as part of the transaction. Summarized, the Itemization of Amount Financed section of the RISC provides:
Cash Sales Price: $30,957.41
Trade-in $27300.00 (-) Payoff $27300.00 = Net-Trade-In N/A
Cash Down Payment $ 4,400.00
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Unpaid Balance of Cash Sale Price $26,197.41
In her complaint, Becker alleges that the value of the Jeep Cherokee was over-stated by $10,800,1 which was "rolled into" and increased the cash price of the Mercedes ML 320 and, in so doing, Pitre failed to disclose that it had rolled the $10,800 negative equity from the Jeep Cherokee into the amount financed.
This case presents a narrow issue of law: does the Truth In Lending Act ("TILA")2 and its implementing regulation, "Regulation Z" promulgated by the Federal Reserve Board,3 require the amount of the "negative equity" in a vehicle traded in on another vehicle to be clearly and separately disclosed?
Summary judgment is appropriate if, when viewing the evidence in the light most favorable to the non-moving party, there are no genuine issues of material fact, and the moving party is entitled to judgment in its favor as a matter of law.4 "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge, [when] he is ruling on a motion for summary judgment."5 In response to a properly supported motion for summary judgment, the opposing party must set forth specific facts showing there is a genuine issue for trial.6 The issue of material fact necessary to entitle a party to a trial is not required to be resolved conclusively in favor of the party asserting the fact; all that is needed is sufficient supporting evidence to require a fact-finder to resolve the parties' differing versions of the truth at trial. There is no genuine issue of fact if, on the record taken as a whole, a rational trier of fact could not find in favor of the party opposing the motion.7
Becker's position is that in showing the amount of the trade-in allowance as being equal to the balance that she owed on the vehicle instead of its actual cash value and "balancing" the transaction by adding the negative equity to the cash price, Pitre failed to disclose that $10,800 of the amount financed was in reality refinancing of the negative equity in the Jeep, not part of the purchase price of the Mercedes. Relying on a recent decision of a California Court of Appeal, Thompson v. 10,000 RV Sales, Inc.,8 Becker argues that this violated TILA and Regulation Z. Pitre, relying on a 20-year-old Seventh Circuit decision, Paull v. Chrysler Credit Corp.,9 argues that it does not. Neither Thompson nor Paull is controlling, and the court has not found any controlling decision of either the U.S. Supreme Court or the Ninth Circuit.
Analysis of the provision of TILA and Regulation Z starts with the basic rules upon which application of TILA is based. Congress has stated, with respect to the purpose of TILA:10
It is the purpose of this subchapter to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices.
The Supreme Court has cautioned that the concept of "meaningful disclosure" cannot be applied in the abstract. It does not necessarily mean more disclosure; rather, it describes a balance between competing considerations of complete disclosure and the need to avoid informational overload.11
Becker argues that Pitre's method of accounting for the negative equity runs afoul of § 1638(a)(2) () and §§ 226.2(a)(9) (defining "cash price"), 226.2(a)(18) (defining "downpayment"), and 226.4 (defining "finance charge") of Regulation Z. The Federal Reserve Board, pursuant to specific authority granted it by Congress,12 adopted Regulation Z implementing TILA. Unless procedurally defective, arbitrary or capricious in substance, or manifestly contrary to TILA, the court is bound by these regulations.13 Neither "cash price" nor "downpayment" are defined by TILA; consequently, as Becker correctly argues, the definitions adopted in Regulation Z bind the court. Although TILA itself defines finance charges,14 the U.S. Supreme Court has held that courts are bound by the Federal Reserve's definition in 12 C.F.R. 226.4.15 Becker also relies in part on the interpretations of Regulation Z contained in Supplement I to Part 226 — Official Staff Interpretations ("Staff Interpretation"). Unless plainly irrational, erroneous or at odds with the regulations, Federal Reserve Board staff interpretations construing TILA or Regulation Z should be dispositive.16
While TILA is generally construed as a remedial statute, interpreted liberally in favor of the consumer,17 Congress has provided a good-faith defense to creditors who comply with the Board's rules and regulations or who conform to any interpretation or approval by an official or employee of the Federal Reserve System duly authorized by the Board to issue such interpretations or approvals.18
Addressing first whether the downpayment was properly disclosed. Regulation Z defines down payment as:19
Downpayment means an amount, including the value of any property used as a trade-in, paid to a seller to reduce the cash price of goods or services purchased in a credit sale transaction. A deferred portion of a downpayment may be treated as part of the downpayment if it is payable not later than the due date of the second otherwise regularly scheduled payment and is not subject to a finance charge.
In the case at bar, Pitre reported no value for the trade-in and a cash downpayment of $4,400. The Staff Interpretation provides that where the trade-in has a negative value and a cash downpayment is made, "creditors may, at their option, disclose the entire cash payment as the downpayment, or apply the cash payment first to any excess lien amount and disclose any remaining cash as the downpayment."20 In this case, Pitre chose not to use the cash downpayment to reduce the excess lien amount but to show the entire cash downpayment as a downpayment. In that case, the amount of the deficit must be reflected as an additional amount financed.21 It is undisputed that the negative equity in the Jeep Cherokee is included in the amount financed.
Although somewhat difficult to follow, Becker argues that Pitre's failure to show a negative number as the total downpayment violates on its face the Regulation Z definition. The argument is incorrect, and even specious given Becker's acknowledgment that Pitre could not disclose a negative number under the Staff Interpretation that Becker contends is controlling. Becker further argues that the negative equity is a deferred downpayment that must be paid not later than the second otherwise regularly scheduled payment. This argument is also incorrect. As Becker acknowledges, Pitre did not treat the equity deficit as part of the downpayment, it included the deficit in the amount financed. The manner in which Pitre disclosed the trade-in as having no net value and the full amount of the cash as the downpayment not only did not violate TILA or Regulation Z but was entirely consistent with the Staff Interpretation, which precludes showing a negative downpayment and permits the full amount of the cash to be shown as the downpayment.
Next, the court addresses the issue of whether the "cash price" was incorrectly stated. "Cash price" is defined in Regulation Z as:22
Cash price means the price at which a creditor, in the ordinary course of business, offers to sell for cash the property or service that is the subject of the transaction. At the creditor's option, the term may include the price of accessories, services related to the sale, service contracts and taxes and fees for license, title, and registration. The term does not include any finance charge.
The Staff Interpretation further refines this definition in the following terms:23
1. Components. This amount is a starting point in computing the amount financed and the total sale price under § 226.18 for credit sales. Any charges imposed equally in cash and credit transactions may be included in the cash price, or they may be treated as other amounts financed under § 226.18(b)(2).
Becker argues somewhat...
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...is not a “finance charge.”Other courts facing similar claims have reached the same result. Slover-Becker v. Pitre Chrysler Plymouth Jeep of Scottsdale, Inc. , 409 F.Supp.2d 1158, 1165 (D.Ariz.2005) (“The cash price was clearly inflated; however, ... the Staff Interpretation permits a credit......
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...upon a case factually on point that held that negative equity is not a finance charge. See Slover-Becker v. Pitre Chrysler Plymouth Jeep of Scottsdale, Inc., 409 F.Supp.2d 1158 (D.Ariz. 2005). Slover-Becker is instructive in recognizing that negative equity is not a cost to a credit custome......